Valuations of Qatari banks ‘not justified’

The nation’s nine lenders trade at almost 11 times projected earnings, data shows

Qatari bank stocks are more expensive than their Saudi or Emirati peers, even after suffering their biggest year-to-date loss in more than a decade.

The nation’s nine lenders trade at almost 11 times projected earnings, according to data compiled by Bloomberg. That compares with 10.5 and 9 for peers in Saudi Arabia and the United Arab Emirates, which cut diplomatic and trade ties with the Gulf nation in early June over alleged support of terrorism.

Some overseas banks withdrew funds from Qatar in the wake of the spat, fuelling a 12 per cent drop in a Bloomberg index of Qatar’s nine lenders this year and wiping out about $7 billion (Dh25.7 billion) from their total market capitalisation.

The valuations aren’t “justified” and the shares “have further room to correct downward,” said Jaap Meijer, the head of research at Dubaibased investment bank Arqaam Capital Ltd.

The risks may not have reflected in the banks’ results yet, but “funding costs are rising — that will put pressure on margins and loan growth will be a lot slower.”

The row has aggravated a liquidity squeeze for banks in the world’s biggest liquefied natural gas exporter. The Qatar banking gauge’s loss this year contrasts with an almost 10 per cent gain for a measure of Saudi lenders and a 22 per cent advance for a MSCI Inc index of emerging-market lenders.